P.O. Box 690, Jefferson City, Mo. 65102-0690

ORDER

After full consideration and review of the report of the financial examination of HMOMissouri, Inc. for the period ended December 31, 2017 together with any writtensubmissions or rebuttals and any relevant portions of the examiner’s workpapers, I, ChloraLindley-Myers, Director of the Missouri Department of Insurance, Financial Institutionsand Professional Registration pursuant to section 374.205.3(3)(a), RSMo, adopt suchexamination report. After my consideration and review of such report, workpapers, andwritten submissions or rebuttals, I hereby incorporate by reference and deem the followingparts of such report to be my findings and conclusions to accompany this order pursuant tosection 374.205.3(4), RSMo: summary of significant findings, company history, corporaterecords, management and control, territory and plan of operation, reinsurance, accounts andrecords, financial statements, examination changes, comments on financial statements,subsequent events, and summary of recommendations.

Based on such findings and conclusions, I hereby ORDER that the report of the financialexamination of HMO Missouri, Inc. as of December31, 2017 be and is hereby ADOPTEDas filed and for 1-IMO Missouri, Inc. to take the following action or actions, which I considernecessary to cure any violation of law, regulation or prior order of the Director revealed bysuch report: (1) account for its financial condition and affairs in a manner consistent withthe Director’s findings and conclusions.

So ordered, signed and official seal affixed this frt day of July, 2019.

Chlora Lindley-Myers, DirecrDepartment of Insurance, Financialand Professional Registration

NOCCCXX

DEPARTMENT OF INSURANCE, FINANCIALINSTITUTIONS AND PROFESSIONAL REGISTRATION

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REPORT OF

FINANCIAL EXAMINATION

HMO MISSOURI, INC.AS OF DECEMBER 31, 2017

STATE OF MISSOURIINSURANCE, FINANCIAL INSTITUTIONS

AND PROFESSIONAL REGISTRATIONDEPARTMENT OF

JEFFERSON CITY. MISSOURI

Table of Contents

SCOPE OF EXAMINATION.

Period Covered

Procedures

SUMMARY OF SIGNIFICANT FINDINGS 2

COMPANY HISTORY 2

General 2

Dividends 3

Acquisitions, Mergers and Major Corporate Events 3

CORPORATE RECORDS I

MANAGEMENT AND CONTROL 4

Board of Directors 4

Officers 4

Committees 4

Holding Company, Subsidiaries and Affiliates 4

Organizational Chart 5

Affiliated Transactions 5

TERRITORY AND PLAN OF OPERATIONS 7

REINSURANCE 8

General 8

ACCOUNTS AND RECORDS 8

Independent Accountant 8

Actuaria’ Opinion S

FINANCIAL STATEMENTS 8

ASSETS 9

LIABILITIES. CAPITAL AND SURPLUS JO

STATEMENT OF REVENUES AND EXPENSES 11

RECONCILIATION OF SURPLUS 12

EXAMINATION CHANGES 12

COMMENTS ON FINANCIAL STATEMENTS 12

SUBSEQUENT EVENTS 12

SUMMARY OF RECOMMENDATIONS 12

ACKNOWLEDGMENT 13

VERIFICATION.13

SUPERVISION 14

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May 9,2019St. Louis, MO

Honorable Chlora Lindley-Myers. DirectorMissouri Department of Insurance. Financial

Institutions and Professional Registration301 West High Street. Room 510Jefferson City, MO 65101

Director Lindley-Myers:

In accordance with your financial examination warrant, a comprehensive financial examinationhas been made of the records, affairs and financial condition of

HMO MISSOURI, INC.

hereinafter also referred to as “HMO MO” or the “Company.” The Company’s main office islocated at 1831 Chestnut Street. St. Louis, MO 63103; phone number (314) 923-4444. Examinationfieldwork began on March 5, 2018, and concluded on the above date.

SCOPE OF EXAMINATION

Period Covered

We have performed a multi-state examination of HMO MO. The last examination of HMO MOwas completed as of December 31. 2013. This examination covers the period from January 1, 2014through December 31. 2017. This examination also includes material transactions or eventsoccurring subsequent to December 31, 2017.

Procedures

We conducted our examination in accordance with the National Association of InsuranceCommissioners (NAIC) Financial Condition Examiners Handbook (Handbook), except wherepractices. procedures and applicable regulations of the Department of Insurance, FinancialInstitutions and Professional Registration (Department) or statutes of the state of Missouriprevailed. The Handbook requires that we plan and perform the examination to evaluate thefinancial condition, assess corporate governance, identify current and prospective risks of theCompany and evaluate system controls and procedures used to mitigate those risks. An examinationalso includes identifying and evaluating significant risks that could cause an insurer’s surplus to bematerially misstated both currently and prospectively.

lIMO-MO— 1213112017 Exam

All accounts and activities of the Company were considered in accordance with the risk-focusedexamination process. This includes assessing significant estimates made by management andevaluating management’s compliance with Statutory Accounting Principles. The examination doesnot attest to the fair presentation of the financial statements included herein. If during the courseof the examination an adjustment is identified, the impact of such adjustment will be documentedseparately following the Company’s financial statements. Key activities identified wereInvestments, Premiums and Underwriting, Claims and Reserves, Capital and Surplus, GeneralExpenses, Taxes. Related Parties, Other Assets and Other Liabilities.

This examination was conducted as part of a coordinated examination of the Anthem. Inc. Group,which consists of 57 insurance companies domiciled in numerous states. The Indiana Departmentof Insurance is the lead regulator for the group. The examination was also conducted concurrentlywith the examinations of the Company’s Missouri domiciled affiliates. Healthhink HMO. Inc. andHealthy Alliance Life Insurance Company.

This examination report includes significant findings of fact, as mentioned in Section 374.205RSMo (Examination, director may conduct, when...) and general information about the insurer andits financial condition. There may be other items identified during the examination that, due to theirnature (e.g.. subjective conclusions, proprietary information, etc.), are not included within theexamination report but were separately communicated to other regulators or the Company.

SUMMARY OF SIGNIFICANT FINDINGS

There were no significant findings resulting from the examination.

COMPANY HISTORY

General

lIMO Missouri, Inc., a wholly-owned subsidiary of BlueCross and BlueShield of Missouri, Inc.(BCBSMO). incorporated on May 28. 1987 and began operating in Januaiy 1988. In 1994.BCBSMO reorganized. The reorganization included the formation and initial public offering ofRightCHOICE Managed Care, Inc. (RightCHOICE’). Following a settlement with the Departmentin 1998 related to the reorganization, BCBSMO was dissolved and its health maintenanceorganization business was assumed by the Company.

On January 31, 2002. RightCHOICE completed a merger with WeilPoint Health Networks, Inc.(WellPoint) and RWP Acquisition Corporation (RWP), a wholly-owned subsidiary of WeliPoint.Under the terms of the merger agreement, RightCHOICE merged into RWP which became thesurviving entity. RWP subsequently changed its name to RightCHOICE Managed Care, Inc. TheDepartment had approved the merger on January 16, 2002. On March 8, 2004. the Departmentapproved the acquisition of WeilPoint by Anthem effective November 30. 2004.

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lIMO-MO— 12/31/2017 Exam

Dividends

The following dividends were paid during the current examination period. The dividends paid in2014 and 2013 were deemed extraordinary and were approved by the Department. The remainingdividends were deemed ordinary with no approval required.

Year Amount2014 $ 20,000,0002015 800,0002016 800,0002017 25,000,000Total $ 46,600,000

Acquisitions, Meruers and Major Corporate Events

In February 2015, Anthem announced that it had been targeted in a sophisticated cyber-attack.Attackers gained unauthorized access to certain of Anthem’s information technology systems.obtaining personal information related to subscribers and employees. In December2016, the NAICconcluded a imilti-state targeted market conduct and financial examination regarding the cyberattack. No fines or penalties were imposed as a result of the examination. Following the filing ofactions in various federal and state courts, in June 2015 the Judicial Panel on Multidistrict Litigationentered an order transferring the consolidated matter to the U.S. District Court for the NorthernDistrict of California. In August2017, the U.S. District Court for the Northern District of Californiaissued an order of preliminary approval for a settlement agreed to by Anthem and the plaintiffs.The settlement included a total payment of $115 million and certain non-monetary relief

In July2015, Anthem and Cigna Corporation (Cigna) announced that they had entered into a mergeragreement under which Anthem would acquire all outstanding shares of Cigna. In July 2016. theU.S. Department of Justice, along with certain state attorneys general. filed a civil antitrust lawsuitin the U.S. District Court for the District of Columbia (District Court) seeking to block the merger.In April 2017, the U.S. Circuit Court of Appeals for the District of Columbia affirmed the ruling ofthe District Court blocking the merger. In May 2017, after the Delaware Court of Chancery deniedAnthem’s motion to enjoin Cigna from terminating the merger agreement, Anthem de)ivered noticeto Cigna terminating the merger agreement.

CORPORATE RECORDS

The Articles of Incorporation and the Bylaws were reviewed. There were no changes to the Articlesof Incorporation or the Bylaws during the current examination period.

The minutes of the meetings of the shareholder and the Board of Directors were reviewed. Theminutes appeared to properly support the approval of major corporate transactions and events forthe period under examination.

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HMO-MO — 1213112017 Exam

MANAGEMENT AND CONTROL

Board of Directors

Management of the Company is vested in a Board of Directors consisting of three members. Thedirectors elected and serving at year-end 2017 were as follows:

Name and Address AffiliationCatherine Irene Keleghan Vice President and CounselSt. Louis. MO Anthem. Inc.

Ronald William Penczek Senior Vice President and Chief Accounting OfficerIndianapolis. IN Anthem. Inc.

Amadou Yattassaye President and Chief Executive OfficerSt. Louis, MO HMO Missouri. Inc.

Officers

Officers of the Company elected and serving were as follows:Same OfficeAmadou Yattassaye President and Chief Executive OfficerKathleen Susan Kiefer Vice President and SecretaryVincent Edward Scher Vice President and TreasurerJennifer Lynn Forsythe Assistant SecretaryEric Kenneth Noble Assistant Treasurer

Corn mittees

There are no committees of the Company’s Board of Directors. However, the parent. Anthem. Inc..has committees that review and approve transactions that are applicable to all insurers in theAnthem Inc. Group. including HMO MO. The following committees of the Anthem. Inc. Board ofDirectors were active, as of December 31, 2017: Audit Committee. Compensation Committee, andGovernance Committee.

Holding Company, Subsidiaries and Affiliates

The Company is a member of an insurance holding company system as defined by Section 382.010RSMo (Definitions). RightCHOICE is the Company’s imnwdiate parent. The ultimate controllingentity in the insurance holding company system is Anthem, a publicly-held corporationheadquartered in Indianapolis. Indiana. Anthem’s common stock trades on the New York StockExchange. Per Anthem’s 2017 proxy statement, no individual owned ten percent or more of itscommon stock.

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HMO-MO— 12/31/2011 Exam

Organizational Chart

The following is an abridged organizational chart depicting the insurance hoLding company systemat year-end 2017. All subsidiaries are wholly-owned unless otherwise noted.

Anthem. Inc.UN)

Anthem HoldingCorp.UN)

RightCHOICEManaged Care, Inc.

(DE)

Healthy Alliance I I IHeahhLink. Inc. I HMO Missouri, ILife Insurance Co. I

(MO) (IL) Inc. (MO)

HealthLink HMO.L.......l Inc.

(MO)

Affiliated Transactions

As of December 31. 2017. the Company was party to the following intercompany agreements.

Guarantee and Conversion AgreementParties: The Company and Anthem

Effective: November 30, 2004

Terms: Anthem guarantees the obligation of the Company. In the event that theCompany ceases operations. Anthem or one of its licensed affiliates willprovide coverage to the Companys policyholders without consideration ofhealth status. The Agreement remains in effect until terminated. TheDepartment must be given thirty days prior written notice of termination.There were no fees associated with the Agreement during the currentexamination period.

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HMO-MO--- 12/31/2017 Exam

Amended and Restated Master Administrative Service AgreementParties: Anthem and its subsidiaries including the Company, Healthy Alliance Life

Insurance Company (Healthy Alliance), and HealthLink HMO. Inc.(HealthLink)

Effective: January 1,2003

Terms: RightCHOICE and its Missouri domestic insurance subsidiaries, includingthe Company, Healthy Alliance and HealthLink receive and provideadministrative services to each other, as well as to Anthem and itssubsidiaries. Employees of Anthem and its subsidiaries provideadministrative services on behalf of the Company. Service fees are based ondirect cost, if determinable. If direct cost is not determinable, an appropriateallocation methodology is used.

Stop-Loss Coverage AgreementParties: The Company and Healthy Alliance

Effective: April 11,2002

Terms: Healthy Alliance will provide stop loss coverage to certain administrativeservices only clients of the Company as required under the administrativeservices agreements between HMO MO and plan sponsors. Rates for thestop-loss coverage are based on the underwriting principles used by HealthyAlliance in setting premiums for similar products.

Out of Network AgreementParties: The Company and Healthy Alliance

Effective: January 15. 1997

Terms: Healthy Alliance agrees to provide out of network coverage to enrollees ofHMO MO choosing an out of network or point-of-service option. HMO MOis to pay Healthy Alliance a per member per month (PMPM) amountdetermined quarterly on the basis of underwriting and actuarial standards andguidelines utilized by the parties. The PMPM amount is multiplied by thetotal number of enrolled members on the fifteenth day of the month for whichpayment is being made to determine the amount payable to Healthy Alliance.

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HMO-MO— 2/3l!20l7 Exam

Consolidated Federal Income Tax AgreementParties: Anthem and its subsidiaries, including the Company. Healthy Alliance and

I-lealthLink

Effective: December 31, 2005

Terms: This agreement establishes a method for allocating the consolidated taxliability of the affiliated group among its members, for reimbursing theparent for payment. for compensating any party for use of its tax losses ortax credits, and for allocating and paying any refund arising from a carrybackof losses or tax credits. Payments are made no earlier than ten days before,and no later than thirty days afier, the dates on which such payments wouldbe due to the federal government if separate returns had been filed. TheCompany incurred $4.65 million in federal income tax expense in 2017.

Cash Concentration AgreementParties: Anthem and its subsidiaries, including the Company, Healthy Alliance and

HealthLink

Effective: October 1,2009

Terms: The Agreement establishes the designation of a Cash Manager: defined as“Anthem or any Affiliate handling the receipt or disbursement of funds onbehalf of one or more Affiliates.” The Cash Manager accepts the receipt ofpremiums. administrative expense reimbursements and other revenue andmakes benefits, payroll, general administrative expense and other accountspayable payments on behalf of Affiliates. Intercompany payables andreceivables are established to record the transaction. Cash Managers arereimbursed for the direct and indirect costs, including overhead, associatedwith the Agreement.

TERRITORY AND PLAN OF OPERATIONS

The Company is licensed in Missouri as a health maintenance organization (HMO) under Section354 RSMo (Health Services Corporations. Health Maintenance Organizations, Prepaid DentalPlans). The Company is also licensed in Illinois, In 2017. the Company reported premium andenrollment data for Missouri only.

Products underwritten by HMO MO are marketed as BIueCHOICE HMO and BIueCHOICE P05Plus. The Company markets to groups and individuals, including seniors.

As a Blue Cross Blue Shield licensee, the Company participates in the Federal Employees’ Program(FEP) and the BlueCard program. FEP is a nationwide contract with the Federal Office of PersonnelManagement to provide health benefits to federal employees and their dependents. The BlueCardprogram allows members travelling or residing in another Blue Cross Blue Shield Plan’s servicearea to access needed health care services through local Blue Cross Blue Shield Plan providers.

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lIMO-MO— 12/31/2017 Exam

REJNSURANCE

General

The Company did not assume or cede any reinsurance during the examination period.

ACCOUNTS AND RECORDS

Independent Accountant

For the period under examination, the Company’s financial statements were audited by the certifiedpublic accounting firm Ernst & Young LLP. The 2012 audit workpapers were reviewed and usedin the course of the examination as deemed appropriate.

Actuarial Opinion

On May31 2016. an Anthem employee. Keith McDaniel. FSA. MAAA. was appointed to reviewand certify the claims-related reserves and other actuarial items. Mr. McDaniel found the claims-related reserves and other actuarial items to be adequately slated.

FINANCIAL STATEMENTS

The following financial statements are based on the statutory financial statements filed by theCompany with the Department and present the financial condition of the Company for the periodending December 31, 201 7. The accompanying comments on financial statements reflect anyexamination adjustments to the amounts reported in the financial statements and should beconsidered an integral part of the Annual Statement.

There may have been additional differences found in the course of this examination, which are notshown in the “Comments on Financial Statements.” These differences were determined to beimmaterial in relation to the financial statements, and therefore were only’ communicated to theCompany and noted in the workpapers for each individual Annual Statement item.

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lIMO-MO — 12/3 1/20 17 Exam

ASSETSAs ofDecember3l. 2017

Nonadmitted Net Admitted

Assets Assets Assets

Bonds $ 64,515,671 $ - $ 64,515,671Cash and cash equivalents 114,952 - 114,952Investment income due and accrued 513,516 - 513,516Uncollected premiums and agents balances 2,789,989 20,427 2.769,562Deferred premiums 3,831,493 - 3.831,493Accrued retrospective premiums 685,013 - 685.013Amounts receivable relating to uninsured plans 864.970 61.664 803.306Current tèderal fricome tax 374.225 - 374,225Net deferred tax asset 767,380 3.984 763.396Health care and other amounts receivable 2.950.768 1.342,775 1.607.993FEP assets held by agents 3.000.240 - 3.000.240Prepaid expenses 972.081 972,081 -

Otherassets 1,019 1,019 -

TotalAssets $ 81.381,317 $ 2,401,950 $ 78.979,367

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HMO-MO— 12/31/2017 Exam

LIABILITIES, CAPITAL AND SURPLUSAs of December 31, 2017

Claims unpaid S 12.829,983Accrued medical incentive pool and bonus amounts 810,447Unpaid claims adjustment expenses 390,102Aggregate health policy reserves 7,216,550Aggregate health claim reserves 9,71 6Premiums received in advance 817,359General expenses due or accrued 1,163,555Amounts withheld or retained for the account of others 522,884Remittances and items not allocated 239,022Amounts due to parent. subsidiaries and affiliates 23.135,1 36Liability for amounts held under uninsured plans 1.469,825Other liabilities 425,125Escheatable lünds 197,518Other premium liability 38.423

Total Liabilities S 49.265,645

Estimated ACA health insurer fee 5,038,428Common capital stock 300,000Unassigned hinds (surplus) 24,375,294

Total Capital and Surplus $ 29.713,722

Total Liabilities, Capital and Surplus $ 78,979.367

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1-IMO-MO— 12/3 1/20 17 Exam

STATEMENT OF REVENUES AND EXPENSESFor the year ending December 31. 2017

Member months 332,969

Net premium income $ 85.015.8l3Change in unearned premium reserves and reserve for i-ate credits (2.930,355)

Total revenues $182,085,458

I-{ospitaVmedical benefits 97,774,008Other professional services 11,258,513Emergency room and out-of-area 4,718.993Prescription dru 33.282,460Incentive pool. withhold adjustments and bonus amounts 2,914,31 5

Total hospital and medical $ 149.948289

Claims adjustment expenses 6.710.284General administrative expenses 13.370.880

Total underwriting deductions $ 170.029.453

Net underwriting gain $ 12.056,005

Net investment income earned 1,361,245Net realized capital gains 33,306

Net investment gains $ 1,394,551

Net loss %om agents’ balances charged off (8.065)Other income (6.222)Net income (pre-tax) 13.436,269Federal and foreimi income taxes incurred 4.650.266

Net income S 8,786,003

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HMO-MO— 12/31/2017 Exam

RECONCILIATION OF SURPLUSAs of December 31, 2017

2017 2016 2015 2014Capital and surplus prior reporting year $45,156,479 $38,251,974 $29,730,427 $39,290,367

Net income 8.786,003 8,815.113 9.899.969 10.378,682Change in net unrealized capital gains 208 (2,414) 13.965 (13.965)Change in net deferred income tax (1.066,083) 482.072 358,253 (169,162)Change in nonadmitted assets 1.837,115 (1,590,266) (950,640) 244,505Dividends to stockholders (25,000,000) (800,000) (800.000) (20.000,000)Net change in capital and surplus (15,442,757) 6,904,505 8,521,547 (9.559,940)

Capitaland surpkis end ofreportingyear $29,713,722 $45.156.479 S38.251.974 S29.730.427

EXAMINATION CHANGES

There were no examination changes resulting from the examination.

COMMENTS ON FINANCIAL STATEMENTS

There were no comments on financial statements resulting from the examination.

SUBSEQUENT EVENTS

There were no events occurring subsequent to December 31, 2017, requiring recognition ordisclosure.

SUMMARY OF RECOMMENDATIONS

There were no recommendations resulting from the examination.

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lIMO-MO— 12/31/2017 Exam

ACKNOWLEDGMENT

The assistance and cooperation extended by the officers and staff of HMO Missouri. Inc. duringthe course of this examination is hereby acknowledged and appreciated. In addition to theundersigned, Andy Balas. CFE, AES. CPA: Doug Daniels, CFE. CPA: Ken Tang. CFE: and, AmySnyder. CFE, CPA, MA. CGMA; examiners for the Department. participated in this examination.

VERIFICATION

State of Missouri )

County of St. Louis)

1. Thomas J. Cunningham. on my oath swear that to the best of my knowledge and belief theabove examination report is true and accurate and is comprised of only facts appearing upon thebooks, records or other documents of the Company, its agents or other persons examined or asascertained from the testimony of its officers or agents or other persons examined concerning itsaffairs and such conclusions and recommendations as the examiners find reasonably warrantedfrom the facts.

TmasJ.Cngham2Acommissioned for St. Louis City . Cl,

My Commission Expiles: November 03 2019 xaminei —in—11argeCommission Number; l5?2_. Missouri Department of Insurance, Financial

[nstitutions and Professional Registration

Sworn to and subscribed before me thi day of -

My commission expires:

// - 03 -

Notary Public

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HMO-MO — 12/31/2017 Exam

SUPERVISION

The examination process has been monitored and supervised by the undersigned. The examinationreport and supporting workpapers have been reviewed and approved. Compliance with NAICprocedures and guidelines as contained in the Financial Condition Examiners Handbook has beenconfirmed.

Michael Shadowens, CFEAssistant Chief Financial Examiner, St. LouisMissouri Department of Insurance, FinancialInstitutions and Professional Registration

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